Recent U.S. Council Publications Available on Request

The Sweeping Implications of the Burke-Hartke Bill. An analysis by Judd Polk, the Council's economist, of the serious implications for international investment of recent protectionist moves in Congress. Mr. Polk examines the trade and investment aspects of the Burke-Hartke Bill, exploring the reasons for labor's protectionist mood, the response of international business, and areas for common agreement on a national policy toward American international investment.

The Limits to Growth, A Critique. A sharp critique by the Council's past chairman, Dr. A. T. Knoppers. of the now famous Limits to Growth report of the Club of Rome. Dr. Knoppers, himself a member of the Club of Rome, analyzes the Limits to Growth report and the computer model developed by the Forrester and Meadows project team, and illustrates how their computations are subject to major change by the introduction of other relevant criteria.

World Monetary Reform-A Long Way Off? A reprint of Judd Polk's article of November 13, 1972 in the Journal of Commerce, in which he points up the differences in national approaches which are apt to hinder monetary reform negotiations and the striking failure in present monetary reform proposals to recognize the fundamental importance of the internationalization of production and of banking structures.

World Companies and the New World Economy. A staff report by Judd Polk in which he discusses the growing internationalization of production in the postwar era, and the need to build an analytical framework to deal with the problems arising from this phenomenon.

Carnet. A basic brochure in a new edition answering such questions as: What is a carnet? Why use a carnet? How are carnets issued? What do they cost? Instructions and application forms for obtaining a carnet.

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A Message from the Chairman

The U.S. Council of the International Chamber of Commerce provides a unique channel of expression for American business with international interests. The U.S. Council's voice is respected in Washington both by Congressional Committees and by the Executive Branch. Its participation in the work of the International Chamber of Commerce in Paris gives American business a voice in the councils of world business and industry as well.

In recent years the U.S. Council has been recognized for pioneering work in identifying the constructive role of international companies and banks in the emergent world economy.

There never was a more important time for both the U.S. Council and the International Chamber of Commerce to make their contributions to mitigating the strains and conflicts that are appearing among the major nations in matters of trade, investment and monetary policy.

The farsighted originators of the U.S. Council and of the International Chamber of Commerce must have perceived just such a role for these organizations.

While governments are wrestling with the increasingly difficult political aspects of these economic problems, the US. Council and the International Chamber have the opportunity to ensure that there is a greater degree of understanding among world businessmen not only of the problems involved but also of the opportunities that exist for their solution.

I hope that all the member companies of the U.S. Council will participate in the important work it will be doing in the months ahead.

April 16, 1973

San Marlanger

lan MacGregor Chairman

1972: A Year of Initiatives

Dr. A. T. Knoppers, past chairman of the U.S. Council, characterized 1972 as "a year of initiatives, a kind of international preparatory period for the expanded events that lie ahead." Indeed, the year saw new advances on a variety of political, economic, and social fronts. The world watched with fascination as an American President toasted the Chinese in Peking and the Soviets in Moscow, thus symbolically marking an end to nearly 25 years of cold war with all its frustrations, waste and danger. The world economic community started a major overhaul of its monetary system while dealing with familiar problems of trade, investment, and the balance of payments. And at Stockholm, 113 nations met to begin the arduous but urgent task of understanding and protecting the human environment.

United States Foreign Economic Policy

The United States made definite progress toward greater coherence and flexibility in foreign economic policy in 1972. An important trade agreement was signed with the Soviet Union-one which the Council's immediate past president, Willis C. Armstrong, helped negotiate as Assistant Secretary of State for Economic Affairs. Further agreements seem likely in view of Soviet technological requirements and probable U.S. need for the vast energy resources of the USSR. It also seems reasonable to foresee significant trade with the Chinese in the future, with their potential market of 850 million people and vast needs.

The U.S. demonstrated its willingness to provide leadership in monetary reform in the proposals submitted by Treasury Secretary Shultz at the September meetings of the International Monetary Fund and now under study by IMF's Committee of Twenty. U.S. backing for the broader Committee of Twenty as the negotiating forum for monetary reform, as against the earlier Group of Ten, gave recognition to the broad international ramifications of decisions in this field and the desirability of having them made by all countries concerned with them. U.S. insistence on treating trade and investment as integral parts of monetary reform placed a new emphasis on the interrelated aspects of these issues.

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Battle Against Protectionism Shaping Up

Despite the impressive performance of international investment and production and the development of an interdependent world economy during the past 25 years, protectionist sentiments are still strong. The new chairman of the United States Council, lan MacGregor, called attention to this "strange dichotomy" in his acceptance speech in December. "On the one hand, our economic, industrial, and technical world has developed a global interdependence On the other side of our modern schizophrenic state of human affairs is the strange and growing importance of political nationalism."

Nowhere was this dichotomy more apparent than in the spate of protectionist legislation introduced in the U.S. Congress during 1972, culminating in the proposed Foreign Trade and Investment Act, known as the Burke-Hartke Bill. Judd Polk, acting president and economist of the U.S. Council, in a paper entitled The Sweeping Implications of the Burke-Hartke Bill, stressed the near expropriatory effects the Bill would have, if enacted, on nearly $180 billion of American investment around the world:

It is apparent that in terms of producing arrangements, (investment) figures of this magnitude represent not only an extensive but an irreversible commitment, a commitment that requires further investment to support, and a commitment that could only be undone in terms of unthinkable loss of output. We are talking about output abroad that is substantial even in terms of the American GNP, and, incidentally, of foreign output here that contributes significantly to that GNP. The figures are so substantial that they raise a question as to how best to define the geographic concept of the American economy.

Mr. Polk pointed out that in the world economy, resources are increasingly allocated on an international basis in accordance with highest-productivity criteria and that "to allocate resources on the basis of other criteria, such as the protection of a displaced industry,

would remove productivity-and hence economics-as the guide to proper resource use."

Rather than imposing artificial restraints on American business in the mistaken belief that to do so will protect domestic industries and jobs, Mr. Polk said that our aim should be to "seek to resolve on a national basis the role the United States can best play in the world economy and how this role can be fulfilled with minimum cost to individuals and maximum benefit to all."

ICC Guidelines for International Investment

At the present advanced stage of internationalized production and distribution, private international investment is a major-if not the major-factor in the world economy. It is a particularly crucial factor for developing countries as official assistance to those countries has been declining. Different viewpoints on private international investment, however, give rise to tensions between international investors and the governments of both host countries and investor countries. That private international investment is a controversial subject, even in "investor'' countries, is witnessed by the threat posed in the U.S. by the Burke-Hartke approach and, in the receiving countries, is witnessed by the recent wave of nationalizations, and restrictive legislation.

The International Chamber of Commerce, after lengthy study, has approved a set of Guidelines for International Investment. These are predicated on the belief that if international investment is to make its optimum contribution to economic and social progress alongside a strong and efficient domestic private sector. it is essential that there be mutual understanding between private international investors and governments on basic issues affecting their relationship. These Guidelines are not a rigid "code of conduct" for international investment, but are designed to facilitate consultation between investors and governments and to promote a better understanding of mutual needs and objectives.

The Guidelines are tripartite-addressed to investor, host government, and investor government-with specific recommendations as to how these three entities might work together more effectively. Individual sec

*ICC brochure, December 1972, $2.00, available from US Council.

tions of the Guidelines deal with investment policies, ownership and management, finance, fiscal policies, labor policies, commercial policies, technological matters and the legal framework for international investment.

The U.S. Council Foreign Investment and Development Committees gave their opinions and submitted recommendations at several stages during the drafting of the Guidelines. In endorsing them, the U.S. Council felt that they would help create a climate of mutual confidence among the parties to international investment and be conducive to an increased flow of this vital investment. Further they could play an important role in current intergovernmental consideration of multinational investment.

ICC Action on the

International Monetary Situation

Immediately following the decision of the U.S. Government in August 1971 to suspend the convertibility of the dollar into gold or other international assets, the U.S. Council began an extensive examination of the consequences this decision would have for world business. This examination continued during 1972.

In April 1972 in Paris the ICC Commission on International Monetary Relations, of which Tilford Gaines, chairman of the Council's Committee on Monetary Affairs, is vice-chairman, adopted a report on the current international monetary situation. This report was later approved by the Council of the ICC, meeting in Venice in May.

With some reservations by the British National Committee, this report argued against floating exchange rates among the major industrial countries, and noted that the de facto floating exchange rates in the period from August to December 1971 had "... brought unsettled conditions that disrupted day-to-day international business operations and longer-term planning. The report acknowledged that wider exchange rate margins would permit greater freedom in domestic monetary policies, and might help prevent or at least reduce speculative movements of funds, but warned that these widened bands ought not to become a means for countries in fundamental payments disequilibrium to obtain competitive advantages that distort international trade patterns.

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While reform of the monetary system should continue to be based on fixed exchange parities, the report also stressed that there should be a much better functioning of the adjustment process, citing the failure of countries to make reasonably prompt adjustment of their exchange rates when they found their external payments clearly in fundamental disequilibrium as being the principal cause for recurrent currency crises.

As regards the future provision of adequate reserves, the ICC supported the continued creation of reserves through Special Drawing Rights to supplement gold. In addition, the ICC went on record as favoring a strengthening of the IMF. Finally, the ICC report emphasized that "the main condition required to support the new exchange rate structure does not lie in the details of the international monetary system but essentially in the prompt and effective use of policy measures by individual countries that will avoid inflation and assure a high degree of monetary stability."

Judd Polk explained some of the difficulties that may be expected to be faced in the coming monetary reform negotiations in an article in The Journal of Commerce, on November 13th. He stressed that very real differences do in fact exist among various national approaches to monetary reform in such crucial areas as the role of controls, the function of the dollar, exchange rate policies, etc. Ultimately, the crucial question being posed to nations is: "Will you accommodate your national policies to the emergence of a world money and credit system that responds to the already internationalized system of production and banking?"

"The need is not for a finer tuning of national currencies but for a world money, and this is the direction in which we should be moving." Mr. Polk stated, and added that the well-being of all nations would be best served if their authorities continue along the liberal path of international policy of the past 25 years, which has provided such manifestly attractive results in terms of prosperity and stability.

Along these lines, the Monetary Affairs Committee of the U.S. Council recently explored the outlook for creating a world central bank as a creative step going beyond the overly nationalistic issues that tend to recur in international monetary reform negotiations.

ICC and the Problem of the Human Environment

The United Nations Conference on the Human Environment, convened in Stockholm in June 1972, marked the first time the nations of the world collectively acknowledged that something had gone wrong with the way mankind has been managing its relationship with the natural world.

The International Chamber of Commerce has been particularly active in the area of environmental concerns. At its Vienna Congress in 1971, the ICC "accepted the challenge to industry arising out of the impact of technology on society" and, following this, established a high level committee of industrialists and experts to cooperate with intergovernmental organizations in the search for and implementation of new approaches and solutions to the problems of the human environment. Through this committee, the ICC helped arrange Briefings for World Business" last spring in Paris and New York, which were addressed by Maurice Strong, secretary-general of the UN. Conference on the Human Environment.

Just prior to the Stockholm Conference, the ICC, together with the Swedish Federation of Industries, organized a World Industry Conference on the Human Environment in Gothenberg, Sweden, where business and industry evidenced their resolve to deal constructively with environmental problems.

The secretary-general of the ICC, Walter Hill, addressed the Stockholm Conference in June, where he presented to the Conference an ICC commentary entitled, industry and the Environment.

In November, at a meeting sponsored by the ICC in Paris, a number of national and international industrial organizations decided in principle to coordinate their enviromental activities in an International Center for Industry and the Environment, in association with the ICC, primarily in order to provide an interface between industry and the United Nations Environment Program. Representatives of the US. Council have participated actively in the preparatory work for this Center.

As keynote speaker at the annual dinner meeting of the U.S. Council in December 1972, Maurice Strong said: ".. I am very encouraged by the interest being shown by industry, and by the steps that have been taken by the International Chamber to establish machinery for communication between industry and a new U.N. organization" in the field of environment.

The ICC and Intergovernmental Agencies

The ICC is the only business organization to enjoy the highest consultative status with United Nations agencies such as ECOSOC, UNCTAD, and the new UN. Environmental Program. Similar consultative arrangements are maintained with such intergovernmental organizations as GATT, the IMF, and the OECD

One of the unique consultative forums for international business is the ICC-UN, GATT Economic Consultative Committee formed a few years ago which brings together the heads of agencies and business leaders from around the world for an annual exchange of views on major international economic issues.

Its fourth session held at ICC headquarters in Pans on January 17-18, 1973 included the participating members listed on pages 10 and 11 On the agenda for discussion were current problems in international trade and payments, monetary reform, the multinational corporation, international investment, and the environment.

The Carnet

A Service to Business by the U.S. Council

The carnet system sharply reduces customs formalities for two categories of goods; commercial samples and professional equipment. A carnet is a customs document allowing special categories of goods to be taken at no cost across international borders. Products Covered range from radar sets to musical instruments, from helicopters to mini-computers. The convenience of carnets in streamlining foreign customs procedures is making their use increasingly popular among international businessmen.

The U.S. Council became the official issuing agent for the ATA carnet in the United States in 1969, and the carnet program has grown remarkably since then. In 1970, the first full year of operations, the Council issued 330 carnets with a total goods value of nearly $5 million. In 1972, 900 carnets were issued, with a total goods value of over $12 million.

Worldwide, 103,000 carnets were issued in 1972 covering goods valued at over $750 million, under the ATA Convention, initiated and administered by the ICC.